A Complete Guide to Hard Money Loans

Is buying and managing profitable real estate properties a long-term dream of yours? Then you’ve probably heard about hard money loans. There are various types of loans available, among which hard money loans are the easiest to qualify for.

Continue reading as we discuss various aspects and benefits of hard money loans. We’ll tell you exactly how to apply for and secure a hard money loan to turn your dream into a real estate reality!

Hard Money Loans: A Definition

Generally, a hard money loan is a short-term loan that offers financial relief to real estate investors who are managing and dealing with short-term investments. An example is balloon payments, which means that the borrower will have to pay the loan principal in full at the term-end.

In case the investor is unable to pay the amount back, they will have to pay a penalty or refinance the loan.

What’s the Interest Rate on Hard Money Loan?

The average interest rate for a hard money loan is 11.25% in 2020, and this rate varied within the range of 7.5-15% in the US. Commercial hard money lenders may also charge “points,”—1 point= 1% of the loan.

How Does a Hard Money Loan Work?

Hard money loans, AKA bridge loans or gap financing, are forms of short term physical cash lending that allow real estate investors to build or sell a property as an investment project.

These loans typically last for one to three years and are perfect for risk-averse investors. House flippers often go for this financial tool as they renovate, rebuild, and sell properties.

Hard money loans are usually offered by private lenders as opposed to a mainstream financial institution such as a bank. You must examine and ensure the lender’s reliability and trustworthiness before applying for a hard money loan. We recommend you opt for a trusted commercial hard money lender like GCP Fund.

How To Get a Hard Money Loan?

Here’s a step by step procedure for doing your homework before applying for a hard money loan:

  1. Assess the worth of your desired property and talk to your lender about it because, in most cases, the property itself acts as collateral.
  2. Prepare documents such as contractor bids, construction budgets, bank statements, and disclose the cash you have to cover the project.
  3. The more interested you’ll appear, the more clout you’ll have with the hard money lender.

Benefits of Hard Money Loans

Let’s delve deeper to understand the benefits of hard money loans for real estate investors:

  1. These loans offer fast-tracked closing.
  2. They have a quick and steady application process.
  3. You don’t need to have a very high credit score to qualify for a hard money loan.
  4. Usually, a hard money loan doesn’t require a tax credit.
  5. They involve interest-only payments.
  6. The application process for a mortgage is time-consuming, particularly if you’re new in an area, and that’s where hard money loans come into play. You can use this funding when dealing with a large-scale project that can’t afford any deviation from a preset timeline.
  7. The property itself serves as collateral when you acquire a hard money loan. Some lenders may also offer leeway by allowing you to put a personal asset as collateral, such as your retirement account.

Interested in Hiring a Hard Money Lender in Chicago, IL?

GCP Fund offers flexible hard money solutions in Chicago, Aurora, and other areas. They help you carry out capital improvement projects swiftly without high risks. Learn more about their bridge financing and construction financing, or contact us to make the right choice for your financial safety and well-being.

Categories: Finance

Leave A Reply

Your email address will not be published.